Key points covered in this article:

  • Over $1.5 trillion in commercial real estate loans will mature by the end of 2026, with refinancing complicated by higher interest rates and falling property valuations.

  • The office sector is under the most pressure, while data centers and industrial properties show relative strength.

  • Investors should prepare by reassessing risk, maintaining flexibility in financing, and adapting to changing market conditions.

 

Commercial real estate is entering a period of transition. In 2025 alone, nearly $1 trillion in loans are scheduled to mature. A large share of that total includes debt that was previously extended in response to rising rates and valuation uncertainty. When combined with the volume of loans expected to mature in 2026, the industry is facing well over $1.5 trillion in refinancing activity within a two-year window.

Some economists have begun referring to it as a maturity wave rather than a maturity wall. The distinction matters; it’s not an immovable event. It is a rolling challenge that will unfold over several quarters and vary by sector, geography, and capital structure. For developers and investors, the key will be early preparation, close monitoring of portfolio risk, and a willingness to adapt as conditions change.

The Big Picture

Taking a step back, the maturity wall refers to the growing volume of commercial loans coming due over a short time. For many borrowers, these loans were underwritten when interest rates were much lower and market conditions more stable. That has changed.

Interest rates have risen in recent years. Even with some recent downward movement from the Federal Reserve, long-term borrowing costs are elevated. For owners facing loan maturity, refinancing often means smaller proceeds, larger payments, or the need for new capital. In some cases, valuations have fallen enough that traditional refinancing is no longer possible.

Loan extensions became common in the past year, especially in cases where lenders believed performance might stabilize. But many of those loans are now back on the calendar. And now, the CRE industry is finding that time bought does not always translate into improved conditions.

For example, in the first quarter of 2025, the total volume of distressed assets reached $116 billion, a 31% increase from a year earlier. Many of these are office properties, but stress is beginning to surface in other sectors as well.

Lenders are cautious but still engaged. In many cases, they are continuing to work with borrowers to extend or modify terms. These extensions help reduce immediate defaults, but the debt doesn’t just disappear.

Sector-Specific Conditions

Office continues to face the greatest difficulty. Vacancy rates remain near 19%, and demand for traditional space has not returned to pre-pandemic levels. Properties with stable tenants and updated amenities still hold value, but many others are falling behind.

Multifamily remains relatively steady. Rents have flattened in some markets, and operating costs are higher, but overall occupancy remains strong. Refinancing is still happening, though it often requires new equity or tighter terms.

Industrial properties are holding up, though the momentum has cooled. Vacancy is low in key logistics markets, and long-term demand drivers remain intact. That said, rent growth has slowed, and development activity is more cautious.

Retail shows a split between well-performing grocery-anchored centers and struggling Class B or C properties. Tenant turnover is higher in some areas, but localized demand continues to support selective investment.

Data centers are emerging as a bright spot. Demand is high, and operators are using structured financing tools like CMBS or ABS to support refinancing and growth. This may be an opportunity for investors looking to diversify or reposition capital in the near-term.

Key Metrics to Watch

Several core indicators can help developers and investors get a better understanding of where things stand and where they may be heading:

Debt Service Coverage Ratio (DSCR): Gauges whether a property’s income can support new loan terms. Falling ratios are a clear warning sign.

Interest Rates: Even small increases can affect refinancing outcomes. Long-term rates continue to shape capital availability.

Valuation Trends: Cap rates are rising in many segments. New appraisals may not support previous loan balances, leading to equity shortfalls.

Occupancy and Vacancy Rates: This is especially important in sectors with leasing risk, such as office and retail. Geographical trends will continue to be important.

There are still opportunities. Distressed assets will come to market. Properties with strong cash flow can be positioned for growth. Investors who bring discipline to the table and make decisions based on updated data will have an advantage.

Strategic Responses

Planning ahead makes all the difference. Developers and investors who take proactive steps now will have more flexibility later. A few practical strategies are proving successful:

Diversify and Reassess Exposure

  • Look beyond traditional assets and explore opportunities in stronger-performing sectors
  • Rebalance geographic focus based on regional economic health and leasing conditions
  • Review tenant concentrations and rollover risks across the portfolio

Build Flexibility into Financing

  • Consider alternative structures and structured financial tools
  • Work with lenders early to explore extensions or partial refinances
  • Maintain liquidity where possible to meet equity gaps or secure future opportunities

Review Asset Management

  • Stay ahead of lease renewals and rollover schedules
  • Control rising expenses in areas like insurance and maintenance
  • Invest in improvements like proptech that strengthen tenant retention or reposition value

Prepare for Multiple Scenarios

  • Model both best-case and stress-case refinancing outcomes
  • Track valuation movements and cap rates by market and asset class
  • Keep open lines of communication with capital partners and lenders

Adaptability is Key

The maturity wall is still unfolding month by month. What matters most is how prepared owners are to respond to changing information. Those who adapt early are more likely to avoid disruption. For more information on this situation, contact Ryan Paul, Partner at PBMares’ Construction & Real Estate team.